Definition of Law of supply
Law of supply is essential microeconomics law. This law expresses that all other factors keeping constant. when the prices of any good and services increase the seller increase its supply of that good in the market and vice versa. This law defines that higher price of goods leads to higher quantity supplied. This means quantity supplied has a positive or direct relationship with price.
Brief Explanation of Law of supply
Economist defines the term supply as when a firm supplies a good and service. The firm must have the resources, ability, and technology to produce it. It can gain profit from producing it moreover has a definite plan to produce it. Resources and technology determine what it is possible to produce. Supply reflects a decision about which technologically attainable item to produce which maximized profit. The term supply refers to the whole relationship between the good’s price and quantity supplied. Law of supply explains the behavior of seller when prices of any good increase or decrease. For instance, if consumer increases their demand for China-made cars. The car showroom owners want to export more Chinese cars because of increasing demand. This will help them to maximize their profit. Similarly, when there is no demand for any product in market supplier will not sell it until it creates some demand. Suppliers are willing to supply a good only if they can at least cover their marginal cost of production. Economist calls this direct relationship the law of supply. This is one of the fundamental laws of microeconomics which always work with law of demand.